Divorce can often be acrimonious and when it comes to splitting the assets of a business during the process, things can become even more so. There is no one-size-fits-all approach to dividing a company during divorce proceedings. In some cases, you may want to keep the business, or you may want to ‘buy out’ your ex. Whatever the case, there are some basics to take into account. We’ve listed the top five in this article.
- Get good legal representation
Firstly, you will need to find a lawyer with experience in family law. It’s worth spending some time considering the track record of two or three lawyers to ensure you are getting the best service and value for money. Although the division of business assets may seem like a headache, it can be a straightforward process that doesn’t need to be lengthy. Ensure your legal team gives you a realistic timeframe and you are working with someone you can trust.
- Get your business valued
You and your ex may agree on the value of your business, but if there is some uncertainty or you cannot agree, then instructing a specialist accountant is a good choice. If you are the shareholder of your business, you will be charged with arranging the valuation, but if it is jointly owned business, you will need to arrange this between you both. When making the valuation, an appointed accountant will look at a number of factors. These include: the standard of living the business provides, its overall structure, plus, financial factors such as revenues, future forecast, and profits. They will also look at the level of risk your business has.
- Think about buying out your ex-spouse
In some cases, it can be worth buying out your ex from the business, if you both agree. To achieve this, you can arrange to make periodical payments to them; a much more manageable option than having to pay a lumpsum. Alternatively, you can use other liquid assets to buy out your partner. For example, one partner could offer the marital home to the other in return for them retaining the business.
- Make the co-owning decision wisely
Although it is not common for ex partners to want to share the running of a business, some have made this decision. A clean break is usually a more prudent method, as co-owning will keep the existing link between you both, which can lead to problems and disagreements further down the line. However, this does eliminate the need for a valuation and removes the business as a financial asset considered by the courts. Plus, each party can still retain the benefits the business brings including continued salaries and profits. But, think wisely before you plump for this option.
- Sell the business
Selling the business is sometimes the best option. However, although doing this provides a clean break for both parties, the process can be lengthy and the timing could be off if the business is not performing well at the time. One party may want to post-pone the sale until the business is performing better. In addition, one of the spouses may be reluctant to sell and as a result, make the sale challenging. This sometimes happens if one partner is much more involved in running the business than the other.
Conclusion
Taking advice ahead of a divorce, or in the very early stages is key to finding the best way to divide business assets. Take time considering all options, and, if possible, work with your ex to reach an agreement to avoid a protracted and drawn-out process.
